Geller: Hard Numbers under Competitive Bidding

LAS VEGAS—“Life was pretty good on Dec. 21,
2010,” said John Geller, vice president of 61-year-old
Medical Service Co. in Cleveland. “I put my head down on the
pillow that evening and when I woke up on Jan. 1, no question it
was a new day.”

Geller, whose company was awarded multiple contracts in three
competitive bidding areas in the Round 1 rebid, said management
thought it was prepared for the start of the program. But he called
what it has encountered since the bid’s Jan. 1 implementation
the “triple witching hour,” citing a 33.5 percent
reduction in oxygen reimbursement, the mounting pressure of audits
and, on top of that, “deductibles season.”

“Roughly 100 days into it, I can’t tell you yet
we’re a survivor,” Geller said April 12 at a Medtrade
Spring session called “Round 1 Lessons Learned.” While
some probably breathed a sigh of relief that Round 2 will be
delayed by six months, he cautioned that delay will not soften the
impact of the bidding program on any company’s business.

In the Cleveland CBA, he noted as an example, payment for an
E1390 oxygen concentrator dropped from about $175 to $103 under
that CBA’s bid rates. “How do you provide services
having a price reduction from $175 to $103?” Geller asked the
audience. “How do you make it work?”

Questions like those are what providers in Round 2 need to
figure out, he said. “In competitive biding, there’s
going to be a significant price reduction from what you’re
currently being paid. You need to understand what it’s going
to cost you.”

Geller suggested doing some “guerilla math” to get
an idea: For any products you are interested in for Round 2, take
the existing competitive bidding prices now in effect from any one
of the nine CBAs. “Subtract that amount from what you are
currently being paid,” Geller said. Apply the difference to
revenues from that product for current patients from January
through March, and multiply by four. “That’s the annual
impact of lost revenue you’ll have,” he explained.

Then begin to prepare yourself for how you’re going to
live under those bid rates, he said. “How will you change
your business structure to be able to afford to exist under those
rates?”

His advice to providers who will be caught up in Round 2?
“Stash your cash,” Geller said. “I cannot tell
you how important that is. For those of you who still have cash
available, zip up your pockets and hang on to it, because
you’re going to need it.”

Session moderator Miriam Lieber said that advice is important
for all providers because “everywhere you turn you need
additional cash” to defend against unknowns in the
industry’s rapidly changing environment.

“The truth is, each and every one of you is actually
involved in competitive bidding,” said Lieber of Lieber
Consulting, Sherman Oaks, Calif. “Whether you like it or not,
it is impacting you.”